Ukraine's PrivatBank reports €4.7bn losses in 2016

By bne IntelliNews February 10, 2017

Ukraine's recently nationalised leading lender Privatbank reported UAH135.3bn (€4.7bn) of losses in 2016, down from a profit of UAH0.2bn a year ago.

A key factor that resulted in such losses was the UAH144.4bn in provisions on all its assets, including UAH132bn in provisioning of its loan portfolio, said the bank, which the government nationalised in December as it found a UAH148bn hole in its balance sheet.

Most of the provisions happened in October-December, which resulted in provisioning of 81% of the bank’s total corporate loan portfolio as of year-end (up from 12% quarter-on-quarter).

As a result, its net loan portfolio decreased by 70% q/q to UAH54.7bn as of end-2016. The losses, which the bank recorded after its nationalisation, were covered by a UAH107bn contribution into its equity from the government (which should have been made in the form of state bonds) and UAH29.4bn of conversion of the bank's liabilities into equity.

The lender's total assets decreased 19% q/q to UAH220bn as of end-2016.

"What we see is a result of the heavy changes of the bank's balance sheet, which was a result of the provisioning of all the related party loans, and the bank's bailout at the cost of the government, some related parties, and unsecured lenders," Alexander Paraschiy, an analyst at the Concorde Capital brokerage in Kyiv, wrote in a research note.

"The bank's end-2016 balance sheet raises some questions," he added. "In particular, we wonder what are the liabilities left as debt securities and subordinated loans for $14.1bn which were not bailed in by the bank."

This may suggest the government inaccurately executed the bail-in, the analyst concluded.


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